Transaction

Transaction is the act of conducting or carrying out a deal or agreement. Transactions can be personal transactions or business transactions.

In business, transactions usually involve the exchange of money. Cases that do not involve money would include deals that ask for sweat equity and trade of goods/property.

The two most common types of financial transactions include:

Purchases – A purchase of any kind is actually a financial transaction. Since purchases are made by almost everyone every single day, this type of transaction is actually the most common of financial transactions. Purchases may mean an outright exchange of cash or an indirect exchange of cash via debit cards, checks, and credit cards. Note that credit card purchases fall under a special category because it a cross between a purchase and the next type of financial transaction to be discussed, which are loans.

Loans – Loans are financial transactions between a lender and a borrower. The lender gives money to a borrower, who then pays the owed amount usually in installments. The lender profits from the transaction due to the interest paid out by the borrower. The borrower benefits from the loan by getting access to a large amount of money, which he can use for different purposes such as tuition fees or buying real property.